Global energy investment totalled more than US$1.8 trillion in 2018

Created: Tuesday, 14 May 2019 06:09

Global energy investment stabilised in 2018, ending three consecutive years of decline, as capital spending on oil, gas and coal supply bounced back while investment stalled for energy efficiency and renewables, according to the International Energy Agency (IEA)

Global energy investment totalled more than US$1.8 trillion in 2018, a level similar to 2017. For the third year in a row, the power sector attracted more investment than the oil and gas industry.

“But the bottom line is that the world is not investing enough in traditional elements of supply to maintain today’s consumption patterns, nor is it investing enough in cleaner energy technologies to change course. Whichever way you look, we are storing up risks for the future.”

The world is witnessing a shift in investments towards energy supply projects that have shorter lead times. In the power generation and the upstream oil and gas sector, the industry is bringing capacity to market more than 20 per cent faster than at the beginning of the decade. This reflects industry and investors seeking to better manage risks in a changing energy system, and also improved project management and lower costs for shorter-cycle assets such as solar PV, onshore wind and US shale.

Even though decisions to invest in coal-fired power plants declined to their lowest level this century and retirements rose, the global coal power fleet continued to expand, particularly in developing Asian countries.

The continuing investments in coal plants, which have a long lifecycle, appear to be aimed at filling a growing gap between soaring demand for power and a levelling off of expected generation from low-carbon investments (renewables and nuclear).

Without carbon capture technology or incentives for earlier retirements, coal power and the high CO2 emissions it produces would remain part of the global energy system for many years to come. At the same time, to meet sustainability goals, investment in energy efficiency would need to accelerate while spending on renewable power doubles by 2030.

Among major countries and regions, India had the second largest jump in energy investment in 2018 after the United States. However, the poorest regions of the world, such as sub-Saharan Africa, face persistent financing risks. They only received around 15 per cent of investment in 2018 even though they account for 40% of the global population. Far more capital needs to flow to the least developed countries in order to meet sustainable development goals.

The report also found that public spending on energy research, development and demonstration (RD&D) is far short of what is needed. While public energy RD&D spending rose modestly in 2018, led by the United States and China, its share of gross domestic product remained flat and most countries are not spending more of their economic output on energy research.